Washington State Insurance Commissioner has introduced a draft legislative on captive insurance.
The proposed legislation on captive insurance, which was introduced to the Washington House of Representatives on 13 January, concerns independently procured insurance and the application of the state’s insurance premium tax for both in-state and out-of-state risk.
The legislation will create a statutory framework for how captive insurance companies can be formed by Washington state companies, who can form them and what taxes will be paid by them to Washington state.
Insurance attorney Steven Beeghly of Seattle-based Kreger Beeghly, commented: “A similar companion bill was recently also filed in the Washington State Senate during this short session. Because of the short, 60-day legislative session this year, there is a possibility bills will not be timely acted upon by the legislature.”
Beeghly explained that as to the importance of this legislation to the captive insurance industry, “even if these bills are acted upon by the legislature, only self procurement is addressed. These bills do not allow for the creation of a captive insurer domiciled in Washington State.”
He added: “We have heard from many stakeholders and expect input to the legislature from both insurance buyers and from insurance companies and producers. I would not be surprised to see substantial changes before these bills proceed to a vote.”
As part of the new regulation, companies must establish that they qualify as an exempt commercial purchaser by filing a form, in the format as decided by the commissioner. The Washington State Insurance Commissioner is also able to request records to confirm that the person qualifies as an exempt commercial purchaser.
In addition, an exempt commercial purchaser must, on or before the first day of March of each year, file with the commissioner a verified statement of all independently procured insurance transacted during the preceding calendar year.
The statement must show an aggregate of net premiums and any additional information as required by the commissioner.
The legislation also requires an exempt commercial purchaser, on or before the first day of March of each year, must remit to the state treasurer through the commissioner a tax on the premiums, exclusive of sums collected to cover federal and state taxes and examination fees, on independently procured insurance subject to tax transacted by the exempt commercial purchaser during the preceding calendar year, as shown by the annual statement filed with the commissioner, and at the same rates as are applicable to the premiums of authorised foreign insurers under this code.
The proposed legislation states that an exempt commercial purchaser who fails to file a report as required by the commissioner in section 1(3) of this act is subject to a $1,000 fine, per violation.
This new legislation comes after the Washington Insurance Commissioner, Mike Kreidler announced that captive insurance would be on the state’s 2020 priorities list after he has taken multiple out-of-state captive insurances to court over unpaid tax to Washington State.
On 2 January, Kreidler also ordered unauthorised insurerKreidler also ordered unauthorised insurers Olympic Casualty Insurance and ASA Assurance to stop insuring risk in Washington state for their parent companies Starbucks and Alaska Air Group.
